education · november 18, 2016 the honorable terry e. branstad governor, state of iowa state...

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Public Safety

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Annual Report FY2016Iowa Communications Network

Education

Healthcare

Iowa Communications NetworkAnnual Report FY2016

Letter to the Governor

Legislative Session Recap

Contracts Exceeding $1 Million

Agency Overview

Services Update

Building a Strong Framework to be Cyber Aware

Visual Presence Network in Operation at BRIC

Students Discuss Broadband Topics During SYBAC Meetings

Strong Broadband Progress for First Responders

One Vision…Three Mandates…Seven Goals

Looking Ahead to Fiscal Year 2017

Financial Information

Charts

Statement of Net Assets

Statement of Revenues, Expenses & Changes in Equity

Statement of Cash Flows

Operating Budget Proposal

Lead Schedule Budget to Actual

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Annual Report FY2016Contents

Grimes State Office Building, 400 E. 14th Street, Des Moines, IA 50319 Phone: 515-725-4692 Fax: 515-725-4727 www.icn.iowa.gov IOWA COMMUNICATIONS NETWORK

IOWA TELECOMMUNICATIONS AND TECHNOLOGY COMMISSION

LIEUTENANT GOVERNOR KIM REYNOLDS GOVERNOR TERRY E. BRANSTAD RIC LUMBARD, EXECUTIVE DIRECTOR

Richard L. Bruner Kathleen Kohorst Timothy L. Lapointe Mary Mosiman CHAIR Kelly Dolan Lange Mary Sellers Robert von Wolffradt

November 18, 2016 The Honorable Terry E. Branstad Governor, State of Iowa State Capitol Des Moines, Iowa 50319 Dear Governor Branstad: On behalf of the Iowa Telecommunications and Technology Commission overseeing the Iowa Communications Network (ICN), I am pleased to submit our Fiscal Year 2016 Annual Report for your review. Throughout the report you will find information explaining how strong high-speed Internet, voice, and video services continue to provide exceptional value to our authorized users. Highlights include:

The announcement of ICN’s collaboration with CenturyLink as a managed service provider. This partnership provides ICN users with a state-of-the-art phone system, bundled with the additional voice efficiency and productivity enhancements of unified communications.

Establishment of a Security Bureau to align ICN with the Cybersecurity framework for the State of Iowa.

Continued partnering with the Iowa Department of Public Safety to provide technical management support to work through the requirements needed for the federal FirstNet initiative.

In Fiscal Year 2016, ICN introduced a new vision of being “Broadband Strong”. The statement emphasizes that ICN can deliver STRONG, FLEXIBLE broadband and FAST experiences to meet the growing broadband needs for education, government, public safety, and healthcare users. That vision will continue to guide the ICN through Fiscal Year 2017. The Commission and ICN have a number of strong broadband initiatives that will benefit our users. Those initiatives include:

Establishing a carrier-grade telecommunications lab. The lab will address all production related testing pertaining to new product introductions, protocol enhancements, services improvements/changes, and scalability in the network infrastructure.

Increasing ICN’s 40 Gb core infrastructure to 200 Gb fabric capacity. This increase dramatically upgrades the untapped potential in the ICN’s infrastructure enabling faster delivery of broadband services.

Creating new cybersecurity products and services for our end users to assist them in protecting their networks.

As we look to the future, ICN will stay true to its mission of providing strong, flexible, and fast broadband to its users. On behalf of the Commission and all ICN employees, we appreciate the opportunity to be of service. Sincerely,

Richard L. Bruner Chair Iowa Telecommunications and Technology Commission


The Iowa Communications Network (ICN) is the country’s premier distance learning and state government broadband carrier network, committed to providing Iowa strong broadband solutions for the education, government, public safety, and healthcare sectors of Iowa.

Iowa Telecommunications and Technology Commission MembersRichard Bruner, ChairKelly Dolan Lange | Kathleen Kohorst | Timothy Lapointe | Mary SellersMary Mosiman, Ex-Officio | Robert von Wolffradt, Ex-Officio

Vision


2016 Legislative Session RecapCommissioner Mary Sellers’ second term appointment (through 2022) was approved by the Senate on April 11. She has served on the Iowa Telecommunications and Technology Commission (ITTC) since 2012. Each commission member serves a 6-year term, and is subject to confirmation by the Senate.

Senate File 2324 was signed by the Governor on May 27. The Act includes appropriations from the Rebuild Iowa Infrastructure Fund including:

• Just over $2.7 million to the Department of Education for Part III lease payments.

• Just over $1.1 million to the ITTC for equipment replacement, operation and maintenance costs.

• In addition the bill authorizes the ICN to exceed its contract limitation amount for purposes of the network core project.

ICN contracts exceeding $1 million during FY 2016, as required by the Code of Iowa, Section 8D.3(3)(f).

• None

Iowa Communications Network Annual Report FY2016

Agency OverviewFinance Bureau

Responsible for financial reporting, and analyzing the financial health of the agency. Finance ensures resources are available to carry out the operational and strategic goals of the organization, and that the agency follows applicable federal and state accounting rules and policies.

Business Services Bureau Provides telecom consulting to customers, revenue and gross margin generation, project and order management, as well as customer service. Responsibilities include: Account Consultants (Sales), Project Management, and Customer Support.

Operations Bureau Ensures voice, video, and data services are available for customer use. The bureau focuses on production operations, the Network Operations Center, Broadband Information Center, and managed service contracts related to the Network. The bureau’s goal is high network availability with minimal disruption, while performing various move/add/changes and maintenance related tasks.

Engineering Bureau Focuses on presales design, transport design, and the Technical Assistance Center (TAC). The group receives and processes customer requests for services and is responsible for capacity planning, which includes determining and managing the bandwidth of all segments.

Security Bureau As part of its mission to serve Public Safety in Iowa, the ICN has a dedicated Security Bureau serving both Public Safety and Cybersecurity initiatives. ICN responds to cyber incidents, provides technical assistance, and collaborates with the Office of the Chief Information Officer.


Internet, Voice, VideoICN Services Update

ICN produced 51,086 Internet Protocol (IP) video hours; 17,427 full motion video hours in FY 16. There are a total of 79 Video@LightSpeed subscriptions being used by ICN users.

In FY 16, education users received 73 direct Internet connection increases & 147 Ethernet increases.

ICN Internet service used by sectors:

• 284 school districts

• 75 government users (State, Federal, City of Des Moines)

• 99 healthcare entities

• 181 public safety locations (including towers)

85% of the Internet provided by the ICN is being used by educational entities (36.4 Gb education, 5.9 Gb non-education).

The amount of Internet capacity purchased by authorized users has increased 41% over the past two years (25.1 Gb to 34.6 Gb).

Video

InternetICN is collaborating with CenturyLink to provide unified communications as a managed service. The predictable Fixed Cost Model offers advanced phone service to users with $0 capital investment. Customers select a phone or service type from a basic, standard, premium, or voice mail only package.

Sites deployed with ICN’s Managed Voice Service (MVS) Solution:

• Iowa Communications Network• Iowa Prison Industries• Office of Consumer Affairs• Iowa Utilities Board• Iowa Economic Development Authority• Commerce Banking• Commerce Credit Union• Commerce Professional Licensure• Iowa Lottery• Iowa Department of Human Services (4

sites) • University of Iowa-AIB Location

Voice


Building a Strong Framework to be Cyber AwareIn the State of Iowa and around the world, the Cybersecurity landscape is rapidly changing shape. The role of the transport provider has had to change over the last year in providing customers options regarding cyber security, and the ICN is staying in step in securing the State’s network cyber ecosystem.

With the increase in threats and cyber-attacks, the ICN, in collaboration with the State of Iowa’s Chief Information Officer (OCIO), is strengthening its ability to protect the State, its customers, and the agency itself. Each day, the Capitol Complex is a target to thousands of cyber threats. An attack can target not just data systems, but industrial controlling equipment, and computers. In addition, through manipulation of images, text, and phrases, one’s emotions and choices are also a target. The human factor continues to be a significant vulnerability, susceptible to phishing emails, malware attacks, ransomware, key loggers, and remote access to cameras that capture keystrokes or video.

ICN has taken proactive measures by implementing a monitoring tool to improve malware detection within network traffic and related infrastructure. The tool provides ICN’s BRIC (Broadband Information Center) with an advanced warning that heightens the situational awareness for malicious activities. If a threat is recognized, steps can be taken to mitigate the threat and take necessary precautions before damage is done.

Visual Presence Network in Operation at BRICICN has a new collaborative way to monitor Iowa’s state-owned broadband infrastructure. The BRIC or ‘Broadband Information Center’ encompasses ICN’s Visual Presence Monitoring Network, which allows for key network and information systems to be monitored with real-time visual presence and collaboration between ICN and other agencies.

ICN’s Ric Lumbard says, “We only have minutes to respond and implement mitigation when our customers are experiencing a cyber-attack. The BRIC provides ICN the ability to collaborate and respond with strong, flexible, and fast strategies. This requires all the intellectual influence in the ICN bureaus to be on the same page quickly, make decisions, and implement real-time solutions.”

In December 2015, TJ Kennedy from FirstNet and former Vermont Governor Jim Douglas toured ICN’s Broadband Information Center (BRIC) with Iowa’s FirstNet team.


Students Discuss Broadband Topics During SYBAC MeetingsHigh school students from across Iowa experienced the opportunity on February 9, 2016 to meet with elected officials at the State Capitol to discuss the importance of strong reliable broadband in their daily lives. The 11 student participants were part of the 2015 - 2016 Statewide Youth Broadband Advisory Council (SYBAC) founded by the ICN.

The SYBAC students were briefed by elected officials on past and current state initiatives relating to technology. Those measures include the ‘Connect Every Acre’ initiative, a cyber security bill, and a measure to prevent identity theft. State Representative Zach Nunn (R- Polk County), himself a former cyber security analyst with the National Security Administration, offered the students insight into the global challenges to security as technology advances.

In addition to meeting with elected officials at the statehouse, SYBAC students also had a special visitor at one of their monthly meeting. Lt. Governor Kim Reynolds participated in a round table discussion with the students on a range of topics including the new Amazon ECHO product, driverless cars, lack of strong reliable broadband in some schools, and future opportunities for students in Iowa. “In Iowa we lead the way in technology. There’s a great future for you in technology here in Iowa.” Reynolds said.

Topics discussed by the 2015-2016 SYBAC students include:

• Technology challenges and incorporating digital devices and cell phones in the classroom.

• Broadband dead zones in schools; teachers/students go into the hallway for a Wi-Fi connection.

• Gaming and coding as a life skill that students are learning.

• Augmented reality and what we consider ‘futuristic technology’.

• Do consumers and retailers have the same level of cyber security responsibility?

• Satellite broadband in vehicles and Wi-Fi in buses.

• Susceptibility of retail companies to data breaches and the security of consumer information.

• Encrypting vs. non-encrypting data over the Internet.


Strong Broadband Progress for First Responders ICN’s executive director Ric Lumbard chairs Iowa’s FirstNet Broadband Committee, which is a sub-committee of the Iowa Statewide Interoperable Communications System Board (ISICSB). The broadband committee is the primary technical working group for the FirstNet process in Iowa. The committee provides guidance and information intended to aid FirstNet in the deployment and operation of the nationwide public safety broadband network. The following updates provide an overview of the work being completed by the FirstNet Broadband Committee.

State Governance Body Consultation MeetingHosted FirstNet representatives for the State Governance Body Consultation meeting in May. FirstNet Regional Consultation Lead, Timothy Pierce, and Government Affairs Representative, Andrew Delaney, provided a FirstNet timeline overview, discussed next steps, and answered questions that the committee had.

Opt-in/Opt-out TaskforceCreated an internal working group called the “Opt-in/Opt-out Task Force” responsible for researching all aspects of the FirstNet Opt-in/Opt-out options to ensure that the State of Iowa has all of the pertinent information to make the best decisions possible. Governor Branstad was provided an update of the Task Force findings.

Quality of Service, Priority and Preemption (QPP)Established a five person committee to focus on QPP. The committee will interface with FirstNet as well as the FirstNet Broadband Committee in relation to QPP discussions or tasks. FirstNet will gather feedback to help inform future QPP network policies.

Tribal OutreachVoted to engage in outreach with tribal entities of Iowa to ensure that all tribes are kept informed of the FirstNet process. The committee met with several individuals of the Meskwaki Tribe, as well as the FirstNet Tribal Regional Representative, Margaret Muhr. The committee will meet quarterly with the Meskwaki Tribe to provide status updates and will continue to make efforts to reach other tribal entities in Iowa.

Iowa FirstNet Public Private Partnership SummitThe Iowa FirstNet Public Private Partnership Summits provide the opportunity for public and private stakeholders to discuss the FirstNet initiative, progress, and updates. In total there have been four summits held.


ICN’s ‘One Vision…Three Mandates…Seven Goals’ was the center piece that ICN staff worked towards for Fiscal Year 2016. ICN introduced a new vision of “Broadband Strong”. The vision emphasizes that ICN can deliver FLEXIBLE broadband and FAST experiences to meet the growing broadband needs for education, government, public safety, and healthcare users.

The vision provided clarity for all aspects of the agency. If an activity was identified that couldn’t be associated with implementing the vision, an evaluation was completed to determine if the activity should continue.

VISION:

BROADBAND STRONG

MANDATES:

STRONG: Resilient, Valuable, Secure and Reliable

FLEXIBLE: Efficient, Dynamic and Customer Friendly

FAST: Transport, Services, Systems and Customer Experiences

MAJOR GOALS:

GOAL 1: A Protected, Secure and Situationally Aware Production Environment

GOAL 2: An Efficient Engineering Systems Environment

GOAL 3: An Engaged, Strategic and Compliant Cyber Environment

GOAL 4: A Margin Managed and Optical Financial Environment

GOAL 5: Provide Customer Facing Broadband Growth Solutions and Establish Broadband Poverty (minimum service level) Remedies

GOAL 6: Aggressive Shift to Implement Flexible Internal Systematic Approaches

GOAL 7: Create Flexible and Fast Customer Broadband Service Delivery Experiences

One Vision…Three Mandates…Seven Goals


Partnership with Public SafetyICN is dedicating resources to insure that the State of Iowa’s critical public safety operations receive the highest level of Broadband management and facilitation as possible.

• FirstNet: In January 2016, FirstNet released the Request for Proposal to deploy the Nationwide Public Safety Broadband Network. ICN has worked with the Iowa Department of Public Safety (DPS), and will continue to work supporting this initiative as it moves forward.

• NG-911: Within the NG-911 Cellular broadband network, the ICN has served primary broadband connections now for several years. ICN is looking at ways it can help strengthen Iowa HSEMD’s ability to serve critical public safety grade broadband to the PSAPs in the state.

• Wi-Fi Internet for School Emergencies (WISE): DPS led pilot initiative, in collaboration with local public safety agencies, to utilize ICN’s broadband connections at school locations.

200Gb Core Upgrade AnnouncementICN’s 40Gb core will be increased five times to a total capacity of 200Gb. This increase will dramatically upgrade the current untapped potential in the ICN’s infrastructure; enabling faster delivery of strong broadband services to areas of key importance including: education, healthcare, public safety and government services. Security ServicesA top priority is creating new cybersecurity products and services for our end users, to assist them in protecting their networks. Customers will be able to call upon ICN’s advanced technical monitoring to respond to outages, cyber threats, & intrusions. Establishing Carrier Grade Telecommunications LabICN will complete construction of a Carrier-Grade Telecommunications Lab located on the Capitol Complex. The lab will address production testing pertaining to new product introductions, protocol enhancements, services changes, and scalability in the network, voice, and video infrastructure. Fast TrackICN is executing a Fast Track process to shorten the time it takes to implement customer orders. Each day, collaboration is completed to discuss current requests and upcoming work orders to identify those that qualify for the Fast Track process. To show the effectiveness, Marion Independent School District requested a bandwidth increase that took only 68 minutes to complete under the new Fast Track process. Statewide Youth Broadband Advisory CouncilContinuing the ICN’s Statewide Youth Broadband Advisory Council for a second year. Last year’s SYBAC students discussed free public Wi-Fi, SunCube FemtoSat satellite, driverless cars, lack of strong broadband in some Iowa schools, and wireless communication technology.

Looking Ahead to Fiscal Year 2017


The ICN generated over $32M in revenues from billed services to authorized users. Approximately $2.2 M is appropriated from the state, half of which is the required state investment that allows the state to receive Universal Service Fund reimbursements on behalf of K-12 schools and libraries. The remaining amount is state agency telecommunications. The “Expenses by Vendor Type” graph shows how the revenue generated is used in supporting the network. The largest ICN expense is related to the cost of the “last-mile” connections that are leased from telecommunications companies.

ICN’s financial statements are shown using Generally Accepted Accounting Principles (GAAP). As a government entity in a fee-for-service environment, ICN uses accrual accounting with a measurement focus emphasizing the matching of revenues with costs of services including depreciation of assets such as network equipment and fiber. Most other State of Iowa agencies use the modified accrual accounting method with a measurement focus emphasizing control and accountability over the raising and spending of public monies.

Iowa Communications Network

* Expenses to outside vendors only - excludes payroll and employee reimbursements

FY16 Financial Information

$-

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$30,000,000

$35,000,000

$40,000,000

FY 2013 FY 2014 FY 2015 FY 2015 FY 2016

ICN Operating and Capital Asset Revenues

Infrastructure Appropriation - CapitolComplex Redundancy

Infrastructure Appropriation - GeneratorReplacement

Infrastructure Appropriation - NetworkEquipment

Other Operating Revenues

Operating Revenue - State GovernmentUser Fees

Operating Revenue - Education User Fees

Operating Revenue - US Universal ServiceFund Reimbursement

$-

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$30,000,000

$35,000,000

$40,000,000

FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Expenses by Vendor Type

E911 Payments

Federal Agencies

Utilities & Gas

Customers

Contractors

Equipment

State Agencies

Other Vendors

Network Maintenance

Telecommunications Companies

25%

23%

7%9%

4%

32%

FY 2016 Expenses

Direct Expenses

Maintenance

Equipment & IndirectInstallationDepreciation & Loss onDisposalOther Operating Expenses

General & Administrative

Video2%

Voice23%

Data54%

Internet16%

Install5%

Other0%

FY 2016 Revenues


Iowa Communications NetworkStatement of Net AssetsAs of June 30, 2016(Unaudited)

ASSETSCash & Cash Equivalents $14,522,509Accounts Receivable 4,595,832Interest Receivable 33,179Inventory 2,283,719Total Current Assets 21,435,239

Unexpended Appropriations 6,569,877Unexpended BTOP Cash 2,918,404Fixed Assets(Net) 14,268,521Prepaid Expenses 553,455Other Assets 13,952Total Deferred outflows of resources 1,428,317TOTAL ASSETS $47,187,765

LIABILITIESAccounts Payable & Accruals 2,810,566Sick Leave Incentive Program - Retirees 25,994Unearned Revenue 2,175,406Short-Term Compensated Absences 758,144Sick Leave Incentive Program - Employees 115,154Total Current Liabilities 5,885,264

LT Sick Leave Incentive Program - Retirees 27,964Long-Term Compensated Absences 48,702LT Sick Leave Incentive Program - Employees 616,642Accrued Sick Leave 83,864Other Post-Employment Benefits 508,707Net Pension Liabilities 4,705,709Total deferred inflows of resources 1,392,828Total Long-Term Liabilities 7,384,416Total Liabilities 13,269,680FUND EQUITYRetained Earnings 33,918,086Total Fund Equity 33,918,086TOTAL LIABILITIES & FUND EQUITY $47,187,765


Statement of Revenues, Expenses & Changes in EquityFor the Fiscal Year Ended June 30, 2016

(Unaudited)


* Operating Loss does not include Non-Operating Revenues, see page 15.

REVENUES Operating Revenues: Voice Services $7,508,902Data Services 22,887,423Video Services(Billed) 535,361Installation Services 1,605,336Equipment Sales 6,455Other Revenues 108,823Bad Debt Expense (68,904)Total Operating Revenues 32,583,396

EXPENSES Direct Expenses: Voice Costs 2,172,119Data Costs 5,133,130Video Costs 4,523Installation Costs 1,041,753Total Direct Expenses 8,351,526

Gross Operating Gain (Loss) 24,231,870

Operating Expenses: Network Equipment 1,116,809System Maintenance 7,817,817System Utilities Costs 135,246Outside Plant Costs 922,068System Repair Maintenance 216,752Other System Costs 282,864Network Installation Costs 633,445Loss on Inventory & Fixed Asset Disposal 135,292Depreciation Expense 2,994,798Total Operating Expenses 14,255,090

Net Operating Gain (Loss) 9,976,780

NON-OPERATING REVENUES (EXPENSES)

Transfer from State of Iowa for capital appropriation 2,249,183Investment Income 91,700Net Non-Operating Revenues 2,340,883Net Gain (Loss) Before Contributions and Transfers 1,544,913

Change in Contributed Capital (64,031)

Change in Net Assets 1,544,913Beginning Net Assets 32,089,226

Total Net Assets $33,634,139

General & Administrative Expenses: Personnel 9,597,707Travel 142,658Administrative Services 266,615Rent 180,714Professional Fees 393,480Other General & Administrative Expenses 191,575Total General & Administrative Expenses 10,772,750 -Net Operating Gain (Loss) Before Non-Operating Income & Transfers (795,970)


Iowa Communications NetworkStatement of Cash Flows (Unaudited)For the Fiscal Year Ended June 30, 2016

Cash flows from operating activities: Cash received from customers $33,056,872 Cash paid for goods and services (22,579,320) Cash paid for salaries and benefits (9,517,267)Net cash provided by operating activities 960,285 Cash flows from non-capital financing activities: Transfer from State of Iowa general fund 530 Transfer from State of Iowa for capital appropriation 2,248,653Net cash provided by non-capital financing activities 2,249,183 Cash flows from capital and related financing activities: Acquisition and construction of capital assets (1,146,546)Net cash provided by (used in) capital and related financing activities (1,146,546) Cash flows from investing activities: Interest received on investments 81,627Net cash provided by (used in) investing activities 81,627 Net increase (decrease) in cash & cash equivalents 2,144,549Cash & cash equivalents at June 30, 2014 Cash & cash equivalents at June 30, 2015 21,866,241Total cash and cash equivalents end of period $24,010,790

Unexpended funds for BTOP Match 8,847,464 Current cash and cash equivalents end of period 15,163,326

Reconciliation of operating loss to net cash provided by operating activities: Operating loss ($1,092,134) Adjustments to reconcile operating loss to net cash provided by operating activities: Depreciation Expense 2,994,798 Loss on disposal of capital assets and inventory 135,292 (Increase) decrease in accounts receivable 63,618 (Increase) decrease in due from other state agencies 145,544 (Increase) decrease in inventory 221,759 (Increase) decrease in prepaid expense (114,320) (Increase) decrease in deferred revenue (316) Increase (decrease) in accounts payable (1,204,034) Increase (decrease) in due to other state agencies (270,362) Increase (decrease) in compensated absences 229,978 Increase (decrease) in pension expense (149,538) Total adjustments 2,052,420

Net cash provided by operating activities $960,285


Operating Budget Proposal

For the Fiscal Years Ending June 30, 2017

(Budget) and June 30, 2018

(Proposed Budget)

Iowa Communications NetworkREVENUES FY 2016 Actual FY 2017 FY 2018 Voice Revenue $7,508,903 $6,116,900 $7,898,804 Installs 140,577 6,000 6,000 Video Revenue 622,655 461,204 308,194 Installs - - - Transport Revenue 17,229,373 17,381,861 17,750,437 Installs 414,882 371,632 447,850 Internet Revenue 5,366,022 5,617,924 5,617,924 Installs 131,255 - - Cyber Security Revenue 263,488 114,718 114,718 Outside Plant Revenue 1,001,462 856,377 925,099 Network Professional Service Revenue - 325,846 25,000 TAC Services - 30,000 30,000 Interest Revenue 91,700 55,429 65,838 Other Revenue 32,439 27,684 18,803

Gross Revenues $32,802,756 $31,365,576 $33,208,668 DIRECT EXPENSESToll 1,315,792 1,003,229 853,307 Switched Access 541,333 352,371 238,823 Managed Voice Service 113,286 600,000 2,280,000 Other Voice Direct Expenses 201,709 118,484 44,007 Installs 270,526 133,941 147,500 Video Direct Expenses 9,708 3,605 3,605 Installs - - - Transport Expenses 5,019,759 4,965,582 5,076,892 Installs 171,524 162,553 166,500 Internet Expenses 106,891 318,856 318,856 Installs - - - TAC Expenses - 25,000 25,000 Outside Plant Expenses 599,704 632,269 712,500

Total Direct Expenses $8,350,231 $8,315,889 $9,866,990 Gross Margin $24,452,525 $23,049,687 $23,341,678

OPERATING EXPENSESSystem Maint. & Technical Support 7,860,583 7,513,658 7,752,066 Outside Plant Expenses 922,067 1,205,623 1,061,770 Other Operating Expenses 1,799,962 1,231,090 1,314,143

Total Operating Expenses $10,582,612 $9,950,371 $10,127,979 Net Margin $13,869,913 $13,099,315 $13,213,699

GENERAL & ADMINISTRATIVEPersonnel Services 9,747,245 9,948,933 9,888,279 Travel 142,658 172,523 145,011 Data Processing, ITE 106,109 139,732 112,000 Other Administrative Expenses 531,482 716,801 501,540 Professional Fees 393,230 1,309,068 1,229,829

Total G, S, and A Expenses $10,920,724 $12,287,057 $11,876,660 Net Cash (Deficit) from Operations $2,949,189 $812,258 $1,337,040

CAPITAL BUDGETCapital Expenditures 1,142,750 5,957,000 3,925,000

Net Equipment Purchases $1,142,750 $5,957,000 $3,925,000 REINVESTMENT OF EQUITY - $5,144,743 $2,587,961

Net Cash (Deficit) $1,806,439 1 1

The FY17 budget deficit is the result of proposed spending on network core upgrades that are necessary to maintain a strong, fast and flexible network. The funding for the expected costs for this phase of the core network upgrade will be mostly provided by re-investment of equity realized in prior fiscal years.

The FY18 budget proposal is submitted in the previous year’s fall budget period and the revenue and expense categories are listed by the reporting methodology used in prior fiscal years up through FY17. The FY18 spring budget proposal will reflect the new revenue and expense reporting methodology adopted for FY18 and beyond which will change some cost centers and add others. The new methodology will also change the application and allocation of expenses to reflect a better matching of those to revenues according to new and adjusted cost centers.


Lead Schedule Budget to ActualFor the Fiscal Year Ended June 30, 2016


Operating Revenues YTD Actual YTD BudgetVideo $530,051 $711,230Voice Services 7,508,902 6,086,644Data Services 22,951,486 21,901,140Installation Charges 1,605,336 1,055,561Other 115,278 148,465Interest Income 91,700 31,606

Gross Revenues 32,802,753 29,934,646Direct ExpensesVideo Direct Expenses 4,523 9,708Voice Expenses (Toll/Switched Access) 2,172,119 1,906,487Data Direct Expenses 5,133,130 5,774,440Installation Expenses 1,019,468 834,547

Total Direct Expenses 8,329,240 8,525,182GROSS MARGIN $24,473,513 $21,409,464

Indirect ExpensesSystem Maintenance, Support & License 7,509,322 7,216,314Outside Plant Expenses 922,068 1,402,812Other Operating Expenses 1,121,235 949,885

Total Indirect Expenses 9,552,625 9,569,011NET OPERATING INCOME/(LOSS) $14,920,888 $11,840,453

General & Administrative ExpensesPersonnel Services 9,517,267 9,743,172Travel Expenses 258,691 140,165Other Administrative Expenses 631,359 785,604Professional Fees 393,480 1,094,765

Total General & Administrative Expenses 10,800,797 11,763,706NET CASH(DEFICIT) FROM OPERATIONS 4,120,091 76,747

Equipment ExpendituresNetwork Equipment 1,027,811 1,845,000

Net Equipment Purchases 1,027,811 1,845,000NET CASH(DEFICIT) FROM

OPERATIONS & EQUIPMENT GROWTH $3,092,280 $(1,768,253)

This report is used as an internal cash management tool and is not based on full accrual accounting. It includes only revenues from operating activities plus some revenue from non-operating activities that are deposited in operating cash such as interest income. It does not contain any non-cash expenses such as depreciation. All revenues and expenses from appropriated monies and grant awards have been excluded.

www.icn.iowa.gov

Annual Report

FY2016

Iowa Communications NetworkGrimes State Office Building

400 East 14th Street, Des Moines, Iowa 50319Phone: 515-725-4692

Toll Free: 877-426-4692Email: [email protected]

TM

education · november 18, 2016 the honorable terry e. branstad governor, state of iowa state...

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